Our Future Now In Greece Part 832: A Painless Today Leads To A Depression Tomorrow

People should be riveted to what’s going on in Greece because in many respects, that’s just America a little further down the path we’re trodding as we speak. Incidentally, it’s not going so well.

Greece is expecting to agree the terms of European leaders for a rescue package this evening as the country seeks to avoid a default on its international debts. But Greeks fear that the cuts, imposed on them in return for a â‚¬130bn bailout, is sending the country spiralling into a catastrophic depression.

…The mood in Athens is a mixture of fatalism and gloom. Dmitris Kakomitas, a pensioner, said “My pension has fallen from â‚¬600 a month to â‚¬300. If I didn’t own my own house I’d have difficulty surviving.” He was standing across the street from three red fire engines that were keeping watch on the smouldering wreckage of a 19th century block of shops burned out by protesters last Sunday. He said he didn’t agree with what had happened, suspected criminals were involved, but added that “it wouldn’t be difficult to find an angry pensioner willing to throw a petrol bottle through a window of one of those shops.”

Others, mostly pensioners, standing around Mr Kakomitas expressed resentment that the wealthy kept their money abroad while poorer Greeks were having to bear the brunt of the cuts. “When the rich do come back to Greece, they will be able to buy our property for a piece of bread,” said Leon Dourmais, another pensioner. Others blamed an over-large and corrupt public sector for the crisis. “What can you expect when every politician appoints five people from his own family?” asked Costas, a retired engineer.

Scepticism about another round of austerity measures and a conviction that it is not going to do much good prevails among experts as well as in the streets. The minimum wage is to be reduced by 20 per cent as part of the new terms imposed by the so-called Troika (the EU, European Central Bank and IMF). “Their idea is that this is going to help employment, but it won’t,” says Aggelos Tsakanikas, the head of research at the Foundation for Economic and Industrial Research in Athens. He says that only 10 per cent Greeks are paid the minimum wage and these are “still paid more than the Bulgarians or the Chinese.” A reduced minimum wage will not make Greece more competitive.

Equally, increasing taxation deepens the depression and does not raise more money for the state because the size of the economy is rapidly shrinking. Greece is entering its fifth year of recession. Dr Tsakanikas says that something should be done to lift public morale so “people can see that something works.” He says that there are five main road projects that are almost complete but have been abandoned. The same is true of seven metro stations in Athens that could be opened quite soon. The problem is that the crisis has now gone on so long that the state is paralysed and even functional parts of the economy are seizing up. “Even healthy firms can’t get credit from the banks,” says Dr Tsakanikas. One of the few positive initiatives the government has taken is to open up the Parthenon to foreign film companies.

When a nation (or even a person) makes every decision based on what brings the most short term pleasure and the least short term pain, eventually it gets to a place where there are no more good short or even medium term solutions; there’s just pain for a long, long time. That’s where Greece is right now. No matter what it does, Greece will have to face a lot of pain for a long, long time. Guess what? We’re making the same mistakes. Politicians don’t want to be called “mean,” they don’t want to tell anybody “no,” they want to maximize what they can give people today, even if it means everyone has a lot less tomorrow. We know where that leads.

It’s called Greece and the time to do something about it is now, not 10 years in the future, because by then, it may literally be too late.